site.btaBudget Committee Rejects Proposed Ban on Export of Russian-Origin Crude Oil, Petroleum Products

The National Assembly Committee on Budget and Finance on Tuesday turned down on first reading a Bill to Oversee the Implementation of the Derogation from the Ban on the Purchase, Import or Transfer of Seaborne Crude Oil and Petroleum Products Originating in or Exported from Russia. The bill had been tabled by Movement for Rights and Freedoms (MRF) leader Mustafa Karadayi and a group of MPs.

Yordan Tsonev (MRF) explained that in connection with the EU embargo on the import of most Russian crude oil, which became effective on Tuesday, and the two-year derogation from the embargo granted to Bulgaria, the bill sought to limit the processing of Russian oil in Bulgaria and to put its import under control. So far, the Lukoil Neftochim refinery near the seaside city of Burgas has been processing Russian crude oil and the resulting products have remained inside Bulgaria or have been reexported. This has had a negative impact on Bulgaria's fiscal performance, because most of the refinery's profit has flown out of Bulgaria.

One of the main objectives of the MRF bill was to stop the re-export from Lukoil Neftochim by imposing VAT and excise duties, Tsonev said. He admitted that events have got ahead of the bill as the EU embargo has become effective and the Bulgarian government has imposed bans in reexport, still allowing some products to be reexported because they cannot be sold or stored in Bulgaria.

Tsoncho Ganev (Vazrazhdane) argued that the bill is not good for Bulgaria, because it would require over BGN 500 million in investments into the refinery and at least 6 months to adjust the system to a different type of oil. "Basically, we will be left without oil and without a working refinery," Ganev warned.

Venko Sabrutev (Continue the Change) noted that the derogation which allows Bulgaria to continue to import Russian crude oil after December 5 was one of the great achievements of Bulgaria's latest regular government, which was dominated by his party. The ban on exporting Lukoil's products from Bulgaria is a good thing, Sabrutev said, because this country will have an advantage in terms of prices.

Martin Dimitrov (Democratic Bulgaria) cautioned that if the export of diesel fuel and petrol from Bulgaria is allowed, this will entail a price hike, because supply for the domestic market will diminish.

Rumen Gechev (BSP for Bulgaria) was certain that if the Lukoil Neftochim refinery is not allowed to export some of its output, it will go out of business.

Delyan Dobrev (GERB-UDF) noted that before the war in Ukraine, 40% of the oil which Lukoil Neftochim was working with was non-Russian. According to Dobrev, the refinery can easily work on 50% Russian and 50% non-Russian oil.

According to Deputy Finance Minister Lyudmila Petkova, none of the EU countries is banned from reexporting.

Last week, the MRF bill was approved by the National Assembly Energy Committee on first reading. The Energy Committee is the leading committee on the bill.

The bill says that imports of crude oil and petroleum products originating in Russia must be declared to Bulgaria's National Customs Agency no later than 7 days prior to import. Petroleum products must be accompanied by a certificate clarifying whether the goods were made of crude oil originating in or exported from Russia.

The bill is aimed to prohibit the export of crude oil and petroleum products to third countries and to other EU member states for the duration of its validity.